Tag Archives: Health Care and Biotech

Hearing Cochlear’s Call

By Andrew Nelson

Analysts at Macquarie took a little break from covering Cochlear ((COH)). They paused just long enough to do a full review of the company, of the cochlear implant (CI) marketplace and they also surveyed 389 US-based Audiologists. Profit forecasts dropped, the price target fell, but the Buy call and the rationale behind it remain the same.

The big question must be: what did Macquarie learn? In a nutshell, they learned that despite an embarrassing product recall, despite supply constraints and despite the ongoing economic weakness in the US and Europe, people will still go deaf and most of them don’t even know about, or aren’t using CI devices and that Cochlear is still the world leader in that technology.

Cochlear sells its products in more than 100 countries and with a 60% market share, it is the global leader in implantable hearing devices. As you can imagine, this is a great position to be in, so why would Macquarie have to completely reassess its view on such a seemingly straight forward story?

The answer is simple: Cochlear has taken a beating over recent months due to the recall of its Nucleus 5 product, announced back in September. In fact, the share price has shed 25% over the past three months. The broker notes management moved fast to fund the recall, putting aside up to $150 at the AGM in October. Macquarie thinks the amount will be more than sufficient to cover the costs.

But the problem is far from just being the cost of what in the CI industry was a very, very big recall. The broker estimates that 1500 units are going to have to be removed from people’s skulls and another 2800 units have been pulled from shelves. However, the bigger problems are an inventory shortfall across the entire market and thus the threat of market share loss from insufficient inventory and from the reputational damage that was caused by the recall.

Macquarie feels, however, that Cochlear has, is and will recover from both of these issues and in fairly short order.

Looking at the supply constraint, or inventory issue, Macquarie notes the company moved quickly to ramp up production, tripling output in just three months. The company has also been able to push back implants, given most patients moving from an initial implant to a Nucleus 5 implant will want to be sticking with the same brand. The company has also moved to on-demand supply, which the broker notes has been working out well. All up, Macquarie sees all of 2012 demand being met.

The big thing helping Cochlear fill the near term shortfall is its Freedom product, which does pretty much the same thing as Nucleus 5. The product is still very popular. So much so that Macquarie thinks it's really not important when the Nucleus 5 gets back on the shelf, as the Freedom is still better and more popular than what competitors are offering.

The reputational damage is a little stickier, but again, the broker is little concerned. Peers have had the same sort of issues, with many doctors surveyed saying that while the Cochlear recall is larger than any before, it doesn’t raise the same sort of concerns. In fact, the broker thinks the recall may have a counterintuitive effect, pushing doctors into a flight to quality, a metric which Cochlear still leads.

In fact, 93% of doctors surveyed seem to feel that Cochlear handled the recall well, while only 8% believe the company’s reputation has been tarnished.

Still, with fewer Cochlear units on the shelf, the broker admits the recall will result in minor market share increases for some of Cochlear’s peers. And while some of these practitioners will come back once supply is restored, there is a chance that some will be lost. Again, the broker thinks this will prove to be only a short to medium term issue, with Macquarie thinking that only 7% of market share will be shed in 2011.

And with Macquarie expecting the CI market to continue growing at 12% a year, and also expecting Cochlear to remain the market leader, the earnings potential for Cochlear remain solid. That said, margins, once the company’s strong suit, will take time to recover to their old growth trajectory, notes the broker. In constant currency terms, gross margin growth has run at around 17% per year over the past 10 years.

Given the N5 recall and the uncertainty as to when the company will return to automated assembly, the broker has pencilled in flat gross margins going forward on a constant currency basis. This has caused the broker to cut its FY12-15 net profit expectations by 40%, 15% and 24% respectively. Macquarie admits it’s probably being a bit too conservative and expects that much of these cuts will be peeled back once Cochlear gets back in to the groove.

That takes us to the maintained Buy call. With Macquarie of the opinion that Cochlear’s current woes will soon be history, the broker simply thinks that the current price is just too good to pass up.

Investors should note Macquarie's new price target is the highest of the eight stockbrokers monitored daily by FNArena. Six out of the remaining seven stockbrokers have a more cautious stance (Neutral) or are negative on the shares with most price targets set well below the current share price. RBS is the only one who shares Macquarie's positive view.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

The Short Report

.ref1 {background-color:#B8E3F8;}

By Chris Shaw

Changes in weekly short positions this week have seen only one case where total shorts have risen by more than 1.0%, while no reductions in short positions reached that level over the past seven days and only two fell by more than 0.5%.

On the increased short position side the biggest increase was seen by a derivative in Asciano ((AIODC)), where shorts rose nearly 1.5% from a negligible level previously. The next largest increase was seen in Alkane Resources ((ALK)), where shorts increased by 0.48% to just more than 3.0%.

On the other side of the ledger, shorts fell most significantly in Bank of Queensland ((BOQ)), a decline of 0.73% to around 4.5% coming despite JP Morgan seeing evidence of the bank still dealing with some margin pressures, but amidst market speculation BOQ's French shareholder Banque Populaire, which owns 12.1%, might be putting its stake up for sale.

Ansell ((ANN)) also enjoyed a decline in shorts of 0.57% to just over 1.5% in the past week, which comes after the company made a minor acquisition in the US that RBS Australia suggested offers some longer-term upside.

Monthly changes in short positions have shown some larger adjustments, with a number of stocks seeing total shorts change by more than 1.0%. On the increase side the largest was for Flight Centre ((FLT)) and Myer ((MYR)), shorts for both increasing by around the 2.0% mark. Despite two cuts in official interest rates signs still point to a difficult trading environment for Australian companies exposed to the consumer discretionary sector.

Another where shorts have risen well above previous levels for the month is Wesfarmers ((WES)), the stock recording an increase for the month of 1.3% to around 3.4% in total. Brokers recently trimmed earnings estimates for Wesfarmers post a site visit, this reflecting not only the impact of ongoing food deflation for Coles but also changes to expectations for the coal operations.

Monthly falls in shorts have been most pronounced for Fairfax ((FXJ)) and BlueScope Steel ((BSL)), both seeing positions decline by around 2.0%. The latter likely reflects ongoing position adjustments post the recently announced equity issue by the company.

Resource stocks have also seen short positions come in, with Western Areas ((WSA)) and Murchison Metals ((MMX)) both recording declines of close to 1.5%. Shorts remain elevated for Western Areas at around 5.7%, though the company is expected to deliver solid news flow between now and the end of the year given the recent commencement of underground mining at Spotted Quoll.

Short positions in Santos ((STO)) have also come down significantly, essentially halving over the past month to 1.3%. While costs at the PNG LNG project are likely to increase the market had been expecting this, so brokers continue to like Santos on relative valuation grounds.

Elsewhere, an increase in short positions for QR National ((QRN)) has been more modest in recent weeks, totalling only around 0.45% for the past month. Despite this, RBS Australia suggests the increase is of significance as a recent cut to coal haulage guidance for the coming year implies some downside risk to earnings in coming months.

While housing numbers in Australia continue to suggest a tough market, shorts have declined over the past month for both James Hardie ((JHX)) and Boral ((BLD)), both by close to 1.0%. For both stocks brokers have seen some signs of conditions improving, these including price increases by Boral and a gradually improving outlook in the US market for James Hardie.

Top Ten Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	JBH	21256085	98833643	21.51
2	ISO	910691	5401916	16.86
3	FXJ	306769252	2351955725	13.07
4	MYR	71330818	583384551	12.20
5	BBG	27827437	255102103	10.91
6	DJS	51341362	524940325	9.76
7	FLT	9018033	99997851	9.01
8	LYC	113981561	1713846913	6.62
9	PPT	2642927	41342420	6.38
10	WTF	13391127	211255444	6.31

To see the full Short Report, please go to this link

IMPORTANT INFORMATION ABOUT THIS REPORT

The above information is sourced from daily reports published by the Australian Investment & Securities Commission (ASIC) and is provided by FNArena unqualified as a service to subscribers. FNArena would like to make it very clear that immediate assumptions cannot be drawn from the numbers alone.

It is wrong to assume that short percentages published by ASIC simply imply negative market positions held by fund managers or others looking to profit from a fall in respective share prices. While all or part of certain short percentages may indeed imply such, there are also a myriad of other reasons why a short position might be held which does not render that position “naked” given offsetting positions held elsewhere. Whatever balance of percentages truly is a “short” position would suggest there are negative views on a stock held by some in the market and also would suggest that were the news flow on that stock to turn suddenly positive, “short covering” may spark a short, sharp rally in that share price. However short positions held as an offset against another position may prove merely benign.

Often large short positions can be attributable to a listed hybrid security on the same stock where traders look to “strip out” the option value of the hybrid with offsetting listed option and stock positions. Short positions may form part of a short stock portfolio offsetting a long share price index (SPI) futures portfolio – a popular trade which seeks to exploit windows of opportunity when the SPI price trades at an overextended discount to fair value. Short positions may be held as a hedge by a broking house providing dividend reinvestment plan (DRP) underwriting services or other similar services. Short positions will occasionally need to be adopted by market makers in listed equity exchange traded fund products (EFT). All of the above are just some of the reasons why a short position may be held in a stock but can be considered benign in share price direction terms due to offsets.

Market makers in stock and stock index options will also hedge their portfolios using short positions where necessary. These delta hedges often form the other side of a client's long stock-long put option protection trade, or perhaps long stock-short call option (“buy-write”) position. In a clear example of how published short percentages can be misleading, an options market maker may hold a short position below the implied delta hedge level and that actually implies a “long” position in that stock.

Another popular trading strategy is that of “pairs trading” in which one stock is held short against a long position in another stock. Such positions look to exploit perceived imbalances in the valuations of two stocks and imply a “net neutral” market position.

Aside from all the above reasons as to why it would be a potential misconception to draw simply conclusions on short percentages, there are even wider issues to consider. ASIC itself will admit that short position data is not an exact science given the onus on market participants to declare to their broker when positions truly are “short”. Without any suggestion of deceit, there are always participants who are ignorant of the regulations. Discrepancies can also arise when short positions are held by a large investment banking operation offering multiple stock market services as well as proprietary trading activities. Such activity can introduce the possibility of either non-counting or double-counting when custodians are involved and beneficial ownership issues become unclear.

Finally, a simple fact is that the Australian Securities Exchange also keeps its own register of short positions. The figures provided by ASIC and by the ASX at any point do not necessarily correlate.

FNArena has offered this qualified explanation of the vagaries of short stock positions as a warning to subscribers not to jump to any conclusions or to make investment decisions based solely on these unqualified numbers. FNArena strongly suggests investors seek advice from their stock broker or financial adviser before acting upon any of the information provided herein.

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

Bell Potter Remains Positive On Oz Life Sciences Stocks

- Oz life sciences stocks have underperformed this year
- Sector still in an uptrend according to Bell Potter
- This suggests upside once market conditions improve
- Bell Potter outlines its preferred plays in the sector

By Chris Shaw

The last seven months have not been kind to Australian life sciences stocks, as Bell Potter's Life Sciences Index has fallen 28% to 76.3 points since May 10 this year. This compares to a 10% fall in the All Ordinaries Index over the same period.

The stockbroker's Life Sciences Index is an equally weighted index of 71 ASX-listed stocks. Having calculated the index back to December 1999, Bell Potter makes two main conclusion. The first is the Life Sciences sector tends to enjoy multi-year trends.

The second finding is despite recent weakness the current trend is bullish and could extend until possibly 2013 in the broker's view. Relative movements support this, as while over the past eight years the All Ordinaries has gained 37% the Life Sciences Index is still 50% below its high of August 2003.

Bell Potter attributes this underperformance to two factors. First, the global debt crisis has reduced the risk tolerance of investors, meaning less interest in the more speculative end of the market. As well, a number of the life sciences companies have disappointed the market in terms of announcements with respect to development progress.

Despite the recent poor performance, Bell Potter sees the sector as well placed to recover as the market comes out of its present period of weakness. News flow should be strong for many companies in the sector over the next 12 months, while fundamentals for most companies are largely unrelated to current economic conditions.

One basic thesis for the sector suggested by Bell Potter is the benefit of the survival of the fittest nature of the market. Post the GFC and a generally poor period from 2007-2009, biotech and medical device companies have performed strongly over the past couple of years.

This reflects a maturing in the sector in Bell Potter's view, with products and technologies now at later stages of development and being better understood by investors in the marketplace. As well, life sciences companies in Australia are now being better managed.

While there is upside potential, Bell Potter acknowledges the life sciences sector is not without risk. As an example the broker points to Pharmaxis ((PXS)), where a negative ruling on its Bronchitol drug cut market value by 74% in a day, only for the decision to later become a positive one.

But with these risks come potential rewards, Bell Potter noting for the 15 biotech and medical device companies under coverage, the average price target upside from current levels is 205%. These targets are based largely on clinical progress expected over the next 12 months.

With respect to clinical results, Bell Potter notes the success rate for biological drugs is now about one-in-three. This means the cost of clinical failure has fallen in recent years, which in turn means companies are not as impacted financially by the failure of a clinical development program.

Another key driver is the fundamental need for big and specialty pharma to acquire new compounds to feed drug pipelines, especially given low research and development productivity. This is happening at the same time Big Pharma is falling over the cliff in terms of patent expiries and as drug development costs are increasing.

This is likely to see M&A activity remain a feature in the sector, as acquisitions can bring late stage drug candidates with lower levels of risk and help freshen product life. As well, Bell Potter notes acquisitions can come more cheaply than internal research and development.

In terms of preferred sector exposures, Bell Potter has seven stocks it particularly likes. These include Bionomics ((BNO)), GI Dynamics ((GID)), Phosphagenics ((POH)), Mesoblast ((MSB)), REVA Medical ((RVA)), Starpharma ((SPL)) and QRxPharma ((QRX)). All are rated as Speculative Buy.

The attraction of Bionomics is two potential blockbuster drugs, one the anti-anxiety compound BNC210 where outstanding Phase Ib/IIa clinical data has been received. The other positive with Bionomics is a strong technology platform, which has delivered a number of valuable pipeline opportunities according to Bell Potter.

Potential in the diabetes and obesity markets are the attraction of GI Dynamics, given the upside on offer from the group's EndoBarrier product. Strong news flow should keep investor attention, especially as Bell Potter notes the EndoBarrier product works better than comparable therapies.

For Mesoblast, Bell Potter sees upside from stem cell technologies that work, as evidenced by Phase II data in heart failure the broker regards as outstanding. Given large cardio therapy markets the share price should benefit from further good trial news in the broker's view.

Phosphagenics offers a transdermal drug therapy that works, Bell Potter noting as an example the company is well placed to develop the world's first patches for the analgesic drug oxycodone. This represents a US$3 billion market in the US alone.

For QRxPharma the MoxDuo drug combination offers investors a late stage opportunity as the drug is near to being released to what is a large and growing pain relief market. Bell Potter suggests the current share price undervalues the upside potential available in QRxPharma.

REVA offers an opportunity in bioresorbable stents, a product Bell Potter suggests could reinvigorate the stent category. This leaves REVA well placed to be a target of M&A activity, while a timetable slippage suggests value at present in the broker's view.

Starpharma should enjoy a strong royalty flow once its VivaGel related condom royalties begin next year. Bell Potter sees additional upside potential given Phase III trials of its bacterial vaginosis product beginning in 2012.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

The Short Report

By Chris Shaw

The past week has seen a number of relatively significant changes in short positions on the Australian Stock Exchange, with 10 companies seeing a change of more than 1% in their total short positions relative to the previous week.

Among those where shorts came down were Beach Energy ((BPT)), shorts here falling by 3.39% over the week to 0.60%. The change follows news the Tantanna to Gidgealpa pipeline is back online, something UBS noted would boost oil volumes for Beach.

Paladin ((PDN)), BlueScope Steel ((BSL)) and James Hardie ((JHX)) also experienced falls in short positions of more than 2% over the past week. For Paladin the change may reflect the Federal Government's proposal to end the ban on uranium sales to India, BA Merrill Lynch seeing this as increasing the pressure on those opposed to uranium mining.

BlueScope has announced a capital raising and the market has likely adjusted its views on the stock given the move will strengthen the balance sheet, while the second quarter report from James Hardie last month came in above most market expectations.

David Jones ((DJS)) has also seen shorts come down, the fall of 1.58% bringing total shorts down to 8.42%. The expected Reserve Bank of Australia rate cut announced yesterday is regarded as a potential positive for the retail sector.

Shorts in Aston Resources ((AZT)) also fell by 0.65% to 0.50% in the week from November 23, which may reflect preliminary merger discussions between Aston and Whitehaven Coal ((WHC)). UBS suggests such a merger would deliver some shared synergies.

In terms of increased short positions, the largest gain over the week from November 23 was in Campbell Brothers ((CPB)), this despite a strong interim profit result. Valuation seems a concern for Campbell Brothers, JP Morgan noting the stock is priced for a continuation of buoyant conditions in its core markets.

Shorts in White Energy ((WEC)) also rose by nearly 2% for the week to just over 3.0% in total, the market still adjusting to the announcement earlier in November of an apparent fall-out with joint venture partner and coal supplier PT Bayan.

Western Areas ((WSA) saw a jump in shorts of 1.26% to 6.7% despite the company announcing the start of underground mining at Spotted Quoll. The start of new operations is when mining companies tend to experience the most teething difficulties, so investors may be adopting a cautious approach while expecting operational hiccups.

Unlike the fall in shorts for David Jones, fellow retailer Myer ((MYR)) has seen shorts rise by 1.25% to more than 11.3% in the past week. This continues a trend of increased short positions in the stock over the past month. RBS Australia estimates Myer is currently trading at a discount to David Jones. This might explain the diverging trend between the two.

RBS also notes an increase in shorts in OM Holdings ((OMH)) over the past week, which may indicate traders continuing to position themselves ahead of an expected equity raising to help fund the Sarawak smelting project.

From a longer-term perspective of a few weeks, RBS Australia notes short positions in ASX ((ASX)) have been creeping up over the past month and now stand at around 1.36%. This is up from around 0.8% a month ago, the change possibly explained by the market accounting for softening volumes in both equities trading and new listings, as well as increasing competitive threats that are emerging.

Another major increase over the past month has been in Bank of Queensland ((BOQ)), shorts here rising from 2.88% late in October to more than 4.5% in late November. Poor credit quality in the core Queensland market has been a major market concern, though some stockbrokers feel this threat has been overplayed and so the stock is seen offering value.

Shorts in Flight Centre ((FLT)) have also risen over the past month, increasing by more than 2.0% to a total short interest of nearly 9.0%. This comes despite the most recent update from the company in early November indicating a strong outbound leisure travel market. This is causing earnings to track well above year ago levels.

Another significant increase over the past month has been to short positions in Wotif.com ((WTF)), which have risen by just over 2.5% to more than 6.2%. Over the last few weeks broker commentary on Wotif.com has reflected increasing concern over the group's growth profile as competition continues to increase.

Falls in short positions of 1-2% over the past month have been experienced by Carsales.com ((CRZ)) and Goodman Fielder ((GFF)), the latter coming at the same time as management indicated a strategic review was still being undertaken to find the best way forward for the company.

Top Ten Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	FIX	209662	407763	51.42
2	BBG	28297259	255102103	11.11
3	BOQ	11865233	225369547	5.26
4	ALL	25035750	543181024	4.62
5	APN	25522616	630211415	4.03
6	ARU	10658766	367980342	2.87
7	AUT	11710494	411655343	2.82
8	ALS	2494569	94193403	2.64
9	ALK	6992475	269028158	2.60
10	ANN	2792718	131197201	2.12

To see the full Short Report, please go to this link

IMPORTANT INFORMATION ABOUT THIS REPORT

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

The past week has seen downgrades again outnumber upgrades, as the eight brokers in the FNArena database have cut ratings on 10 stocks while lifting recommendations on just three. Total Buy ratings remain at 57.4%, little changed from last week.

Among those upgraded were Metcash ((MTS)) post the group's interim profit result. While the result was slightly weaker than the market had expected the medium-term earnings outlook is improved by the fact the legal uncertainty of the proposed Franklins acquisition has now mostly passed.

This was enough for JP Morgan to upgrade to a Neutral rating, while Credit Suisse went one better and upgraded Metcash to Outperform from Neutral to reflect both the Franklins purchase and improved valuation post recent share price weakness. Targets and earnings estimates were adjusted across the market.

Seven West Media ((SWM)) was the other upgrade for the week, Citi lifting its rating to Buy from Neutral. While ad market conditions remain difficult, the broker suggests lead indicators are turning a little more positive.

The still tough conditions mean stock selection will be important in the sector and here Citi also sees reasons to like Seven West relative to peers. Citi's upgrade was accompanied by changes to earnings estimates and price target. On the same basis Citi has downgraded APN News and Media ((APN)) to Neutral from Buy, while also cutting its price target for the stock.

An in-line interim result from Campbell Brothers ((CPB)) wasn't enough to stop Deutsche Bank downgrading the stock to Hold from Buy, though the change is a valuation call rather than one indicating any concerns over the growth outlook for the company. Forecasts and price targets for Campbell Brothers across the market rose on the back of the result.

Weak end markets continue to impact on earnings for GUD ((GUD)) and RBS Australia has lowered its estimates and price target accordingly. The changes have caused the broker to downgrade to a Hold rating on the stock.

Recent share price outperformance and the fact the company will be cycling tough comparable numbers in coming months has prompted RBS to downgrade Nufarm ((NUF)) to a Hold rating. There are only minor associated changes in forecasts and price target from brokers covering the stock post a trading update from management.

Primary Health Care ((PRY)) has offered fresh earnings guidance to the market in the past week but the issue for BA Merrill Lynch is the guidance doesn't appear to be conservative. This suggests limited scope for outperformance, which is enough for the broker to downgrade to a Neutral rating. The update from management has seen only minor changes to estimates and targets across the market.

A more disappointing trading update from management at Symex ((SYM)) has seen RBS take the axe to its numbers, the broker more than halving its price target. Given a debt/cost restructuring now looks more critical, the broker has downgraded to a Neutral rating.

RBS has also downgraded TPG Telecom ((TPM)) to a Hold rating, as while the company has lifted its stake in iiNet ((IIN)) the broker sees any deal between the two as difficult given cultural differences. The change in shareholding in iiNet also sees the broker adjust its price target and earnings assumptions.

Disappointing production guidance was enough for both BA-ML and UBS to downgrade ratings for Woodside, the former to Underperform and the latter to Neutral. Brokers across the market have cut earnings forecasts and price targets post the update, with a couple of mentions for Santos (STO)) as a preferred play in the sector at present.

Concerns over the growth profile for Wotif.com ((WTF)) have seen Citi downgrade to a Sell rating, this given concerns over too much leverage to domestic tourism. A cut in price target follows from changes to earnings estimates.

With UBS initiating coverage of Regis Resources ((RRL)) with a price target above others in the market there has been a lift in the consensus target for the stock, while the broker also sees some upside potential in Cardno ((CDD)) and has lifted its target there as well. The consensus target for Bathurst Resources ((BTU)) has also come down slightly on the back of Citi initiating coverage.

In terms of changes to earnings estimates, forecasts for Air New Zealand ((AIZ)) have come down to reflect high fuel costs, while weak guidance from management at Qantas ((QAN)) has also resulted in some cuts to expectations.

The potential for spending cuts in the IT sector have impacted on BA-ML's model for Technology One ((TNE)), while some adjustments to commodity price forecasts saw earnings estimates trimmed for Rio Tinto ((RIO)).

Higher costs have seen minor changes to models for Santos ((STO)), while the potential for Alacer Gold ((AQG)) to lose part of its stake in the Copler project proved enough for UBS to cut its numbers and price target.

On the positive revision side, higher than expected guidance from Miclyn Offshore ((MIO)) saw Macquarie lift its estimates and price target, while the broker also made some changes to its model for Macquarie Atlas ((MQA)).

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	Metcash Limited	Sell	Neutral	JP Morgan
2	Metcash Limited	Neutral	Buy	Credit Suisse
3	SEVEN WEST MEDIA LIMITED	Neutral	Buy	Citi
Downgrade
4	APN NEWS & MEDIA LIMITED	Buy	Neutral	Citi
5	Campbell Brothers Limited	Buy	Neutral	Deutsche Bank
6	G.U.D. HOLDINGS LIMITED	Buy	Neutral	RBS Australia
7	NUFARM LIMITED	Buy	Neutral	RBS Australia
8	PRIMARY HEALTH CARE LIMITED	Buy	Neutral	BA-Merrill Lynch
9	SYMEX HOLDINGS LIMITED	Buy	Neutral	RBS Australia
10	TPG TELECOM LIMITED	Buy	Neutral	RBS Australia
11	WOODSIDE PETROLEUM LIMITED	Neutral	Sell	BA-Merrill Lynch
12	WOODSIDE PETROLEUM LIMITED	Buy	Neutral	UBS
13	WOTIF.COM HOLDINGS LIMITED	Neutral	Sell	Citi

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	MMX	- 67.0%	- 33.0%	34.0%	3
2	MTS	- 13.0%	13.0%	26.0%	8
3	BTU	50.0%	67.0%	17.0%	3
4	GNC	50.0%	67.0%	17.0%	6
5	SUL	33.0%	50.0%	17.0%	6
6	RFG	50.0%	67.0%	17.0%	3
7	SWM	63.0%	75.0%	12.0%	8
8	AQG	40.0%	50.0%	10.0%	6
9	RRL	67.0%	75.0%	8.0%	4
10	CDD	67.0%	75.0%	8.0%	4

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	WPL	63.0%	38.0%	- 25.0%	8
2	TPM	100.0%	75.0%	- 25.0%	4
3	ORL	100.0%	80.0%	- 20.0%	5
4	CHC	100.0%	83.0%	- 17.0%	6
5	GUD	67.0%	50.0%	- 17.0%	6
6	CPB	29.0%	14.0%	- 15.0%	7
7	BSL	43.0%	29.0%	- 14.0%	7
8	WTF	38.0%	25.0%	- 13.0%	8
9	NUF	38.0%	25.0%	- 13.0%	8
10	DJS	- 25.0%	- 38.0%	- 13.0%	8

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	MMX	0.203	0.390	92.12%	3
2	RRL	3.257	3.618	11.08%	4
3	CPB	49.327	50.830	3.05%	7
4	SWM	4.045	4.151	2.62%	8
5	CDD	6.213	6.333	1.93%	4
6	CHC	2.482	2.500	0.73%	6
7	NUF	4.843	4.866	0.47%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	BSL	0.851	0.627	- 26.32%	7
2	WPL	44.009	40.099	- 8.88%	8
3	RFG	3.085	2.913	- 5.58%	3
4	APN	1.140	1.081	- 5.18%	8
5	BTU	1.000	0.967	- 3.30%	3
6	WTF	4.348	4.216	- 3.04%	8
7	TPM	1.860	1.820	- 2.15%	4
8	DJS	2.796	2.745	- 1.82%	8
9	GUD	9.048	8.898	- 1.66%	6
10	GNC	8.675	8.533	- 1.64%	6

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	COF	8.733	9.733	11.45%	3
2	RRL	15.867	17.150	8.09%	4
3	RFG	26.150	28.033	7.20%	3
4	CPB	286.857	305.329	6.44%	7
5	CDD	55.220	57.570	4.26%	4
6	GNC	79.377	82.617	4.08%	6
7	MIO	21.365	21.934	2.66%	4
8	MQA	8.267	8.433	2.01%	6
9	SWM	41.313	42.075	1.84%	8
10	SUL	51.117	51.717	1.17%	6

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	AIZ	10.322	7.791	- 24.52%	4
2	QAN	14.863	12.988	- 12.62%	8
3	TNE	7.767	7.200	- 7.30%	3
4	RIO	836.708	787.603	- 5.87%	8
5	STO	62.413	59.000	- 5.47%	8
6	AQG	59.396	56.725	- 4.50%	6
7	MML	67.870	64.922	- 4.34%	3
8	SLM	31.033	29.700	- 4.30%	6
9	IFL	43.900	42.700	- 2.73%	7
10	TEL	15.065	14.695	- 2.46%	8

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

The Short Report

By Chris Shaw

On face value the second week of the FNArena Short Report looks very similar to last week, as eight of the top 10 securities are the same and the top seven are in the same order as the week before. But as with last week, the significance comes in identifying changes to short positions rather than the actual percentage of a particular security that has been sold short.

The top 10 short positions over the past week on the ASX have been JB Hi Fi ((JBH)), ISO, the Small Ordinaries index tracker, Fairfax Media ((FXJ)), Billabong ((BBG)), Myer ((MYR)), David Jones ((DJS)), Flight Centre ((FLT)), Gunns ((GNS)), Perpetual Trustees ((PPT)) and Lynas Corporation ((LYC)).

Shorts in Gunns have increased significantly to nearly 8% from just over 5% the previous week, this adjustment occurring in the lead-in to the company's annual general meeting. In contrast, most of the rest of the top 10 have seen little change, the likes of Myer, JB Hi Fi, Fairfax and Flight Centre all recording only minor adjustments in total short positions in the past week.

Numbers have risen slightly for Billabong, which coincides with share price weakness last week some in the market attributed to investors selling given potential for the stock to be removed from the ASX100 index. Removal from such an index would cause some fund selling given the mandates fund mangers have in place in regards to what stocks they can hold in their portfolios.

Outside the top 10, short positions have increased for the likes of Resolute Mining ((RSG)) to more than 2.6% from less than 1.0% previously, this coming after the issue of more than 5.6 million new shares following the exercise of some listed and unlisted options.

Shorts have also increased in Cochlear ((COH)) to more than 6% from around 5% previously, the general uncertainty of the company's product recall being added to by a report from Credit Suisse of market share in bone conduction devices coming under pressure from competitor Med-E1.

Steel plays remain out of favour as short positions in both BlueScope ((BSL)) and OneSteel ((OST)) have risen over the past week, this on the back of BlueScope's move to raise equity to address balance sheet concerns.

Aston Resources ((AZT)) announced changes to its board earlier this month and the market has responded by an increase in short positions, while shorts in Goodman Fielder ((GFF)) also rose leading into the group's annual general meeting.

Bathurst Resources ((BTU)) also saw an increase in short positions leading into the announcement of first coal exports from the Buller project, while investors took the opportunity to increase shorts in Beach Energy ((BPT)) prior to that company's annual general meeting.

On the other side of the market, shorts fell in Energy Resources of Australia ((ERA)) as the company completed a bookbuild for the retail shortfall of a recent equity raising. There are no signs of any major shift in preferences in the uranium sector, as the level of shorts in Paladin are largely unchanged.

Santos ((STO)) has enjoyed a reduction in short selling positions since the last FNArena Short Report, which comes just prior to what was a disappointing update from rival Woodside ((WPL)) in terms of production guidance for the coming year.

While White Energy ((WEC)) has yet to fully resolve its feed coal supply issues, the market has reduced short positions in the stock from more than 2.8% to less than 1.4%, while the market also lowered total shorts in Western Areas ((WSA)) from about 6.3% to less than 5.5% leading into the company's annual general meeting.

Top Ten Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	JBH	20294875	98833643	20.53
2	ISO	885115	5401916	16.39
3	FXJ	289084551	2351955725	12.30
4	BBG	28575703	255102103	11.19
5	MYR	62657295	583384551	10.71
6	DJS	52701616	524940325	10.02
7	FLT	8507685	99990391	8.50
8	GNS	66008241	848401559	7.77
9	PPT	2890642	41342420	7.01
10	LYC	110615212	1713846913	6.41

To see the full Short Report, please go to this link

IMPORTANT INFORMATION ABOUT THIS REPORT

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

In another week where downgrades have dominated, brokers in the FNArena database have lowered ratings on 12 stocks while upgrading just four. This brings total Buy ratings to just a touch under last week's 57.7%.

Among the upgrades was BlueScope Steel ((BSL)), Macquarie moving to an Outperform rating from Neutral on expectations the “new” BlueScope will be a closer play on the domestic economic cycle. This reflects a reduction in some loss making export operations as part of an operational restructuring.

Macquarie expects the market's confidence in BlueScope will lift as the proposed cost out story and earnings improve, which should be enough to drive a re-rating of the stock in time. Earnings and price target have been adjusted not only by Macquarie but also by the likes of JP Morgan.

A strategic review by Goodman Fielder ((GFF)) has also prompted an upgrade by Macquarie to Neutral from Underperform, the broker taking a slightly more optimistic approach to new management's proposed cost out story. Improved valuation also supports the upgrade in rating, as do increases to earnings estimates. At the same time Macquarie has trimmed its price target for the stock.

JP Morgan meanwhile has upgraded to Overweight from Neutral on Lend Lease ((LLC)), driven by what it sees as a solid medium-term earnings growth outlook and an attractive valuation at current levels. The broker has also identified some positive near-term catalysts such as new work for Valemus and good mixed-use and residential development pipelines. Forecasts and price target have also been adjusted.

Sonic Healthcare ((SHL)) enjoyed an upgrade to Neutral from Sell by UBS, the broker now adopting a more positive stance on opportunities in the UK pathology sector as outsourcing momentum increases. Factoring in the potential also saw UBS adjust its price target higher for the stock.

On the downgrade side, Aston Resources ((AZT)) has been downgraded to Neutral from Outperform by Macquarie to reflect uncertainty from board changes arising from a difference of opinion in relation to corporate strategy.

While the Maules Creek project continues to offer promise, the board issues have seen Macquarie remove a previous takeover premium, which also means a cut in price target. A similar boardroom issue at Mount Gibson ((MGX)) has also seen Macquarie downgrade to an Underperform rating from Neutral previously.

Both UBS and BA Merrill Lynch downgraded Campbell Brothers ((CPB)) during the week, both on valuation grounds to reflect recent share price gains. In both cases the brokers moved to Neutral ratings from Buy recommendations previously, though BA-ML did lift its price target slightly.

Recent outperformance was also enough for JP Morgan to downgrade Coca-Cola Amatil ((CCL)) to Neutral from Overweight, while earnings estimates have been trimmed in anticipation of another wet summer impacting on demand.

Citi's downgrade on Commonwealth Bank ((CBA)) to Sell from Neutral is based on the view a new CEO will be looking for growth avenues, so potentially putting some downward pressure on the share price. As well, Citi's view is the recent trading update by the bank implies a slow start to the new fiscal year.

A strategy day was enough to prompt RBS Australia into making minor changes to its model for Iluka ((ILU)), with earnings and price target both adjusted. While the stock now offers an attractive yield there is potentially less growth on offer, which supports the broker's move to a Hold rating. Other brokers have also adjusted earnings forecasts and targets for the stock post the update.

While Incitec Pivot's ((IPL)) full year earnings broadly met expectations Credit Suisse downgraded to a Neutral rating from Outperform, this reflecting a tempering of expectations in coming years. Price target was unchanged, so the downgrade was a valuation call by the broker. Others in the market have made modest changes to earnings forecasts and price targets.

Valuation also explains Citi's downgrade of James Hardie ((JHX)), as the company delivered a solid 2Q update with some signs of volume and margin improvement. Price targets and earnings estimates have been adjusted modestly across the market on the back of the quarterly result.

For MAp Group ((MAP)) valuation is also an issue in the view of JP Morgan, who has downgraded to Underweight from Neutral given the share price is now in line with its estimate of value. Also supportive of the downgrade is the stock is trading at a premium to the market, this despite the possibility of softer passenger numbers in coming months.

Peet ((PPC)) delivered a weak update and a lowering of earnings guidance for the full year caused brokers to quickly adjust forecasts and price targets. Both UBS and Macquarie downgraded to Neutral ratings from Outperform previously, as weak operating conditions and capital levels suggest outperformance is unlikely in the shorter-term.

In terms of other changes to broker models, earnings expectations for Lynas Corporation ((LYC)) have seen minor changes following a site visit to the LAMP facility in Malaysia, while a solid quarterly for associate companies has prompted some minor increases to earnings estimates and price target for Cabcharge ((CAB)).

A revaluation of projects has seen BA-ML make a minor increase to its price target for Santos ((STO)), while earnings forecasts for Crown ((CWN)) have also seen minor changes following a solid quarterly result from the MPEL venture in Macau.

Changes in depreciation and amortisation charges have caused Credit Suisse to lower earnings forecasts for Alacer Gold ((AQG)), while Sims Group ((SGM)) selling Australian Refined Alloys has prompted some minor model changes on the part of brokers covering the stock.

While Elders ((ELD)) delivered an improvement in full year earnings, the result still falls short of acceptable according to RBS Australia, with both RBS and Citi adjusting forecasts and price targets as a result.

A disappointing AGM update has seen Macquarie lower earnings forecasts and price target for Salmat ((SLM)), with JP Morgan and Credit Suisse also reducing their estimates. For BHP Billiton ((BHP)) a fall in price target reflects changes to commodity price assumptions from Macquarie, while Credit Suisse has also tweaked its model.

ARB Corporation ((ARP)) is expected to experience some difficulty in sourcing parts given flooding in Thailand, where most of its products are sourced. Both Macquarie and Credit Suisse have adjusted estimates, with the former also trimming its price target for the stock.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup Suisse,Deutsche<br>Bank,JP<br>Morgan,Macquarie,RBS<br>Australia,UBS&b0=124,121,128,106,90,147,195,158&h0=74,92,80,118,87,94,106,80&s0=39,16,14,6,27,21,7,12" style="border-bottom: #000000 1px solid; border-left: #000000 1px solid; border-top: #000000 1px solid; border-right: #000000 1px solid" />

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	BLUESCOPE STEEL LIMITED	Neutral	Buy	Macquarie
2	GOODMAN FIELDER LIMITED	Sell	Neutral	Macquarie
3	LEND LEASE CORPORATION LIMITED	Neutral	Buy	JP Morgan
4	SONIC HEALTHCARE LIMITED	Sell	Neutral	UBS
Downgrade
5	ASTON RESOURCES LIMITED	Buy	Neutral	Macquarie
6	Campbell Brothers Limited	Buy	Neutral	BA-Merrill Lynch
7	Campbell Brothers Limited	Buy	Neutral	UBS
8	COCA-COLA AMATIL LIMITED	Buy	Neutral	JP Morgan
9	COMMONWEALTH BANK OF AUSTRALIA	Neutral	Sell	Citi
10	ILUKA RESOURCES LIMITED	Buy	Neutral	RBS Australia
11	INCITEC PIVOT LIMITED	Buy	Neutral	Credit Suisse
12	JAMES HARDIE INDUSTRIES N.V.	Buy	Neutral	Citi
13	MACQUARIE AIRPORTS	Neutral	Sell	JP Morgan
14	Mount Gibson Iron Limited	Neutral	Sell	Macquarie
15	PEET & COMPANY LIMITED	Buy	Neutral	Macquarie
16	PEET & COMPANY LIMITED	Buy	Neutral	UBS

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	ALZ	50.0%	67.0%	17.0%	6
2	LLC	71.0%	86.0%	15.0%	7
3	BSL	43.0%	57.0%	14.0%	7
4	IFL	57.0%	71.0%	14.0%	7
5	QAN	75.0%	88.0%	13.0%	8
6	BXB	63.0%	75.0%	12.0%	8
7	SHL	63.0%	75.0%	12.0%	8
8	SGT	50.0%	57.0%	7.0%	7
9	AZT	75.0%	80.0%	5.0%	5

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	PPC	100.0%	67.0%	- 33.0%	6
2	CPB	57.0%	29.0%	- 28.0%	7
3	MAP	50.0%	33.0%	- 17.0%	6
4	ILU	88.0%	75.0%	- 13.0%	8
5	IPL	63.0%	50.0%	- 13.0%	8
6	JHX	25.0%	13.0%	- 12.0%	8
7	CCL	75.0%	63.0%	- 12.0%	8
8	BLY	88.0%	86.0%	- 2.0%	7

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	AZT	12.088	12.870	6.47%	5
2	JHX	6.391	6.609	3.41%	8
3	ILU	19.938	20.456	2.60%	8
4	QAN	2.125	2.166	1.93%	8
5	LLC	9.729	9.836	1.10%	7
6	SHL	12.804	12.908	0.81%	8
7	CPB	49.024	49.327	0.62%	7
8	ALZ	2.985	2.990	0.17%	6
9	CCL	12.459	12.478	0.15%	8
10	BXB	7.601	7.608	0.09%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	PPC	1.817	1.445	- 20.47%	6
2	IPL	4.150	3.931	- 5.28%	8
3	SGT	2.820	2.700	- 4.26%	7
4	BSL	1.363	1.356	- 0.51%	7

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	AZT	25.275	39.460	56.12%	5
2	LYC	0.540	0.580	7.41%	4
3	CAB	53.333	54.450	2.09%	5
4	JHX	29.712	30.223	1.72%	8
5	CHC	22.467	22.800	1.48%	6
6	IPL	32.054	32.413	1.12%	8
7	CPB	283.886	286.857	1.05%	7
8	STO	61.163	61.775	1.00%	8
9	CWN	54.025	54.525	0.93%	8
10	MAP	7.259	7.287	0.39%	6

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	PPC	12.833	7.108	- 44.61%	6
2	GBG	1.157	0.771	- 33.36%	6
3	AQG	67.394	59.400	- 11.86%	5
4	SGM	128.943	115.414	- 10.49%	7
5	ELD	5.525	5.000	- 9.50%	3
6	SLM	35.350	32.017	- 9.43%	6
7	SFH	8.520	8.120	- 4.69%	5
8	AIO	10.025	9.650	- 3.74%	8
9	BHP	418.629	403.328	- 3.66%	8
10	ARP	57.225	55.625	- 2.80%	4

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

The past week has proven to be a more balanced one for broker rating changes, the eight brokers in the FNArena database upgrading five ratings while downgrading seven stocks. Total Buy ratings now stand at 57.7%.

Among the upgrades was RBS Australia lifting its rating on Collection House ((CLH)) to Buy from Hold post a trading update that showed ongoing earnings momentum. While an equity raising is expected the size should be modest and given the move will reduce balance sheet leverage RBS sees the decision as a positive.

Also upgraded during the week was Computershare ((CPU)) after the company announced it had received approval for the acquisition of BNY Mellon Shareowner Services. Macquarie saw the announcement as enough of a positive to move to an Outperform rating from Underperform previously, given the long-term growth the deal should deliver.

Brokers across the market have adjusted earnings estimates and price targets for Computershare, not only to reflect the acquisition and two other small bolt-on deals, but to also include AGM earnings guidance that implied still weak operating conditions.

UBS upgraded Myer ((MYR)) post a quarterly sales result that met expectations, which for the broker implies evidence of some form of positive momentum building into the Christmas sales period. While no other ratings were adjusted brokers in general lifted earnings estimates and price targets for Myer on the back of the sales result.

An upgrade to Outperform from Neutral for Qantas ((QAN)) by Macquarie is a reflection of a de-risking of the earnings profile, this following some industrial resolutions. Macquarie has also lifted its price target but lowered earnings for FY12 to account for the airline paying compensation to passengers impacted by the recent grounding.

On the downgrade side of the ledger, Australian Pipeline Trust ((APA)) saw two downgrades during the week, Macquarie and Credit Suisse moving to Neutral ratings from Outperform previously to account for a less attractive valuation following recent gains for the former and a sector review by the latter.

Credit Suisse similarly downgraded Diversified Utility and Energy Trusts ((DUE)) to Neutral from Outperform as part of its sector review, while Macquarie has downgraded SP Ausnet ((SPN)) to Neutral from Outperform on the back of a fall in price target. The change reflects cuts to earnings forecasts to account for higher interest costs and a delay to some earnings.

Citi downgraded CSR ((CSR)) to Neutral from Buy post the interim earnings result, this as management downgraded the outlook for coming periods at the time of the result. Cuts to earnings estimates and price targets reflect ongoing headwinds, a theme identified also by others in the market.

Expectations of further falls in employment advertisement volumes have seen BA Merrill Lynch downgrade Seek ((SEK)) to Neutral from Buy, the move accompanied by cuts to earnings estimates and price target. As BA-ML points out, the current share price implies an unemployment rate of 6.0% for Australia, meaning there is downside risk if conditions in the labour market worsen beyond this level.

Citi has moved to Neutral from Buy on White Energy ((WEC)) to reflect uncertainty from news JV partner and coal supplier PT Bayan plans to increase the cost of feedstock coal. The move means increased risk to production expectations at the Tabang plant and so creates enough uncertainty for Citi to take a more cautious stance. The share price tanked following the news.

Ongoing uncertainty as to the full extent of recall issues for Cochlear ((COH)) has prompted Credit Suisse to downgrade to an Underperform rating from Neutral previously. The removal of a previous multiple premium sees the broker lower its price target for the stock as well.

With Citi initiating coverage on Miclyn Offshore ((MIO)) with a Buy rating and $2.15 price target overall ratings and the consensus target for the company have improved, while targets for Brambles have been adjusted slightly post a solid quarterly trading update.

One consequence of the industrial issues at Qantas is an increase to earnings estimates for Virgin Blue ((VBA)) as both BA-ML and JP Morgan expect earnings to receive a boost from the company having picked up additional traffic in recent months.

Better than expected interim guidance from Seven Group ((SVW)) has seen earnings forecasts lifted across the market, while signs of a recovery for Macmahon ((MAH)) have prompted Macquarie to lift its full year numbers.

JP Morgan now sees a better US market outlook for Aristocrat ((ALL)) and has adjusted its numbers accordingly, while Telecom New Zealand ((TEL)) has seen some minor changes to valuation models leading into structural separation.

The announcement of $50 million in losses related to the flooding in Thailand has led to brokers lowering earnings estimates for Insurance Australia ((IAG)), while commissioning delays have caused Deutsche Bank to lower forecasts for Lynas Corporation ((LYC)). A similar delay to first shipments from Karara have prompted cuts to earnings estimates and price targets for Gindalbie ((GBG)).

Weak interim guidance was enough for brokers to lower forecasts for Perpetual ((PPT)), while difficult trading conditions have seen Credit Suisse trim forecasts for Boral ((BLD)). Orica ((ORI)) has also seen earnings estimates lowered to reflect additional costs stemming from the forced shutdown of the Kooragang ammonia storage facility.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	COLLECTION HOUSE LIMITED	Neutral	Buy	RBS Australia
2	COMPUTERSHARE LIMITED	Sell	Buy	Macquarie
3	MYER HOLDINGS LIMITED	Neutral	Buy	UBS
4	QANTAS AIRWAYS LIMITED	Neutral	Buy	Macquarie
Downgrade
5	AUSTRALIAN PIPELINE TRUST	Buy	Neutral	Credit Suisse
6	CSR LIMITED	Neutral	Neutral	Citi
7	DIVERSIFIED UTILITY AND ENERGY TRUSTS	Buy	Neutral	Credit Suisse
8	SEEK LIMITED	Buy	Neutral	BA-Merrill Lynch
9	SP AUSNET	Buy	Neutral	Macquarie
10	SP AUSNET	Buy	Neutral	UBS
11	WHITE ENERGY COMPANY LIMITED	Buy	Neutral	Citi

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	CPU	14.0%	57.0%	43.0%	7
2	BXB	63.0%	75.0%	12.0%	8
3	MYR	13.0%	25.0%	12.0%	8
4	MIO	67.0%	75.0%	8.0%	4

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	APA	63.0%	38.0%	- 25.0%	8
2	SEK	88.0%	75.0%	- 13.0%	8
3	COH	- 25.0%	- 38.0%	- 13.0%	8
4	MRM	80.0%	67.0%	- 13.0%	6
5	DUE	50.0%	38.0%	- 12.0%	8
6	TSE	50.0%	40.0%	- 10.0%	5
7	SGT	50.0%	43.0%	- 7.0%	7

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	CPU	8.526	9.277	8.81%	7
2	MIO	1.970	2.015	2.28%	4
3	MYR	2.509	2.563	2.15%	8
4	BXB	7.581	7.626	0.59%	8
5	APA	4.430	4.443	0.29%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	TSE	2.922	2.788	- 4.59%	5
2	MRM	3.500	3.433	- 1.91%	6
3	COH	55.315	54.840	- 0.86%	8
4	DUE	1.796	1.785	- 0.61%	8
5	SEK	7.309	7.265	- 0.60%	8

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	VBA	2.614	2.871	9.83%	7
2	SVW	78.100	81.900	4.87%	4
3	MAH	5.800	5.933	2.29%	3
4	ORI	195.563	199.613	2.07%	8
5	ALL	10.688	10.863	1.64%	8
6	MIO	21.072	21.377	1.45%	4
7	TEL	18.347	18.532	1.01%	8
8	EGP	20.538	20.725	0.91%	8
9	APA	19.163	19.288	0.65%	8
10	IAG	26.725	26.875	0.56%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	LYC	0.850	0.540	- 36.47%	4
2	GBG	1.157	0.771	- 33.36%	6
3	IGO	15.760	12.820	- 18.65%	5
4	DUE	11.169	9.569	- 14.33%	8
5	PPT	154.100	135.400	- 12.13%	7
6	OST	17.043	15.114	- 11.32%	7
7	CSR	17.525	16.225	- 7.42%	8
8	CPU	54.560	51.497	- 5.61%	7
9	PRU	23.600	22.517	- 4.59%	6
10	BLD	26.550	25.425	- 4.24%	8

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

Prima Biomed And The Topic Of Cancer

- Prima Biomed developing C-Vac ovarian cancer vaccine
- Nomura initiates coverage with a Buy rating

By Chris Shaw

Prima Biomed ((PRR)) is developing a recurrence vaccine for ovarian cancer called C-Vac, which is an immunotherapeutic vaccine. Immunotherapy is a technology that uses the body's own processes to destroy cancer cells, the advantage being less side effects compared to external chemotherapeutic agents.

The process sees the patients own dendritic immune cells sensitised against components of the patient's ovarian cancer. These sensitised cells then attach to cancel cells and transport them to the immune system where the cancer cells are destroyed.

Nomura has initiated coverage on Prima Biomed with a Buy rating, attracted to both the technology being developed and the potential for the share price to benefit as clinical data from the company is released to the market.

At present, Prima Biomed is preparing for a Phase III clinical trial, which is due to commence in the current quarter. Final data from the trial is expected in 2014, though data from a Phase IIb clinical trial should be released in the final quarter of next year and so provide some interim news flow.

Potential partnering opportunities are the likely source of positive news for Prima Biomed between now and the release of Phase III trial data.

According to Nomura, the potential market size of Prima Biomed's C-Vac treatment is around US$2 billion annually. Assuming the treatment can be used on 25% of those females with a recurrence of epithelial ovarian cancer, the potential market is around US$500 million per year.

The five-year relative survival rate for Australian women with ovarian cancer has increased to 40% in 2000-2006 from 33% in 1982-1987. But as Nomura notes, 90% of sub-optimally debulked patients and 70% of optimally debulked patients relapse in the 18-24 months following primary treatment. Nomura expects Prima Biomed will, at least initially, aim for regulatory approval as a treatment for recurrent cancer.

Such patients are traditionally re-treated with platinum-based chemotherapy, often in combination with other agents. One problem is cumulative toxicity from primary therapy can preclude re-treatment with the likes of paclitaxel and carboplatin. This suggests a clear market for Prima Biomed if the company's trials show its technology delivers positive results.

In previous Phase I clinical tests C-Vac has been shown to be safe, while Nomura notes 19% of patients responded to the treatment in Phase IIa tests conducted in Australia. Given the results were not statistically significant, the upcoming Phase III trial will be the key to assessing the effectiveness of Prima Biomed's technology more thoroughly.

Revenues could come before the Phase III trials are completed, as Nomura notes the Dubai Healthcare City (DHCC) has granted approval for marketing and distribution of C-Vac in the DHCC. If Prima Biomed can finalise an Australian manufacturing licence and a test run to show logistical chain of custody from Dubai to Australia and back, first sales of C-Vac could come before the end of this year.

Early revenues are unlikely to be enough to allow Prima Biomed to avoid going back to the market to raise additional funds. Nomura suggests a further capital raising will be needed to allow Phase III clinical trials to continue, as the cost of such a trial can be as much as US$60,000 per patient and the trial is planned to involve 800 women.

Factoring in a capital raising and the expected time-line for the Phase III trial and bringing C-Vac to market, Nomura has set a valuation based price target for Prima Biomed of $0.31. This implies significant upside of better than 60% relative to the current share price.

There is little with which to compare the estimates of Nomura, as a market capitalisation for Prima Biomed of around US$225 million means the stock receives little coverage. None of the eight brokers in the FNArena database provide research on the company.

Shares in Prima Biomed today are unchanged as at 12.00pm with a last sale price of $0.175. This compares to a trading range over the past year of $0.10 to $0.42.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

Treasure Chest: Impedimed Surprises

What?

Biotech company Impedimed ((IPD)) has surprised analysts and investors this morning by announcing FDA clearance of the Company’s LDex U400 device. RBS Morgans analysts see "plenty of upside" for the share price following this announcement.

Why?

Impedimed has announced it has received clearance from the US FDA clearance of the Company’s LDex U400 device to aid in the clinical assessment of unilateral lymphoedemaof the arm in women, and legs for both men and women. Additionally, the FDA has allowed the indication to be expanded to include patients who will have, or who have had lymph nodes from the axillary and pelvicregions removed, damaged or irradiated. RBS analysts, who have been positively surprised by this announcement, report this broadens the claim beyond just cancer and no longer links it to any one specific cancer.

The analysts report company management sees this as an additional major expansion of the available market. RBS estimates this could easily triple the current accessible market.

The analysts point out their present forecasting does not include any upside for this approval. Previously the analysts have run scenarios which account for this possibility and it values the company over $4.00 per share. While admitting it is early days yet on penetrating this market, this morning's announcement is labelled "very positive" by RBS Morgans.

RBS anticipates investors will react positively to the announcement, while noting there's "plenty of upside to our price target and valuation".

The FNArena archive shows RBS (Morgans) rates the shares Buy with a price target of $1.14 (probably under review now). The shares last traded at $0.57.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.